Health care law waivers stir suspicion of favors

June 7, 2011

WASHINGTON - Call it the Department of Waivers and Adjustments. It's doing a brisk business with the new health care law.

President Barack Obama's administration has granted nearly 1,400 waivers easing requirements of the new health care law, and some critics on the right say Obama is giving his political allies a pass from burdensome requirements everyone else will have to live with.

But what if the waivers work more like a safety valve? What if during the transition to a new system they can prevent unintended consequences - such as people with bare-bones insurance losing their current coverage, or insurers closing shop in a particular state?

Here are some questions and answers on waivers, an issue that's heating up on Internet forums and has prompted inquiries and hearings by congressional Republicans.

Q: Unions are getting these waivers. Doesn't that show that the Obama administration is rewarding political supporters?

A: Several unions have gotten waivers, but most seem to be going to employer plans, according to statistics from the Health and Human Services Department.

"There is no role that politics plays in any way, shape or form in the processing of the application," said Steve Larsen, director of the department's Center for Consumer Information & Insurance Oversight, which approves or denies waivers.

At the conservative Heritage Foundation, a proponent of repealing the law says he's seen no evidence of favoritism, only questionable policy decisions.

"At this point, I don't see any evidence of a scandal yet," said policy analyst Ed Haislmaier. "My suspicion is that they didn't want the bad publicity of people losing coverage, not that there was some particular favoritism or lobbying. However ... this solution naturally raises suspicions, whether founded or not."

Q: So an office headed by an administration bureaucrat is able to waive the entire health care law?

A: Actually, no. The waivers mainly address two provisions. And they are time-limited.

One is a regulation that says insurance plans can't impose a per-patient limit of less than $750,000 this year for medical care, including hospital stays, doctor visits and medications.

So far, about 1,400 annual limit waivers have been issued, an approval rate of more than 90 percent. They cover plans that serve about 3 million people, or 2 percent of those with private insurance. The other provision is a requirement that insurance companies spend at least 80 percent of the premiums they collect on medical care and quality, as distinct from overhead and profits.

Three states - Maine, New Hampshire and Nevada - have gotten what the administration calls "adjustments" to the 80-percent standard. Insurers in those states will be held to a lower requirement, say, 65 percent.

State officials had feared that some insurers who sell coverage directly to individuals would be unable to meet the higher standard and would just leave. Another 10 requests are pending from states.

Q: Why do they even need to issue waivers for these things?

A: The explanation is the same in both cases: Without waivers, several million people would be at risk of losing their coverage.

If that happened, Obama and the Democrats would really have some explaining to do, since the law is meant to expand coverage, not add to the 50 million uninsured.

Q: How could a health care law put so many people's coverage in jeopardy?

A: The reason is the long transition until the law's main benefits take effect until 2014. That year, millions of people will get tax credits to help pay their premiums, health insurers will be barred from turning away those in poor health, state-based insurance markets will make it easier to shop for a policy and many employers will be required to contribute toward the cost of workers' care. Right now, there's none of that.

So if employers currently offering a skimpy insurance plan drop it because of the requirement that this year they cover up to $750,000 in annual expenses, or if insurers pull out of a state because they can't meet the 80-percent test in that particular market, then the people they cover would have very few options.

"You would get reporters writing stories about how the Democrats passed this bill, and the Schultz family lost its health insurance and now poor Tommy has a brain tumor," said Robert Laszewski, a former-health-insurance-executive-turned-policy-consultant.

Any law dealing with an area as complicated as health care is going to have unintended consequences, said Laszewski. "You have to manage through it in a common-sense way," he added.